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Booking.com’s Call for Help Draws Dutch Outcry, Policy Rethink

April 24, 2020, 7:35 AM

The Dutch government plans to tighten the rules for businesses claiming coronavirus relief after one of the nation’s most successful tech companies was accused of seeking state aid while paying billions of dollars to shareholders.

Global travel site Booking.com drew an outcry from politicians and the media after Chief Executive Officer Glen Fogel told newspaper De Volkskrant on April 15 that it was applying for government help, and that layoffs are still likely. The company has around 5,500 employees in the Netherlands.

“Profit machine Booking.com raises its hand for state aid,” wrote financial daily Het Financieele Dagblad. Evening paper NRC Handelsblad called the request “the dark side of the business climate.” Much of the criticism focused on its use of tax planning and past payouts to investors. Parent company Booking Holdings Inc. has bought back $16 billion worth of stock over the past three years, according to its financial statements.

“Booking paid so much money to its shareholders in recent years that there aren’t any buffers,” said Jaap Koelewijn, corporate finance professor at Nyenrode Business University, by phone. “This is a classic example of privatizing the profits and socializing the losses,” he said.

Satirical commentator Roel Maalderink went into Amsterdam’s streets this week to ask passers-by to spare some coins to help the shareholders of Booking.com and oil giant Royal Dutch Shell Plc. He took what he gathered to a Booking.com office and called a receptionist to offer the donation.

Maalderink managed to raise 13.50 euros ($14.62), which he ended up donating to a food bank.

Booking.com said it was working hard to support its employees and cope with a “decimated” travel market.

“Most major companies have announced major layoffs, but we are doing absolutely everything we can to weather the storm,” the company said in an emailed statement. It said it may raise capital in public markets and impose a hiring freeze.

The anger isn’t focused solely on Booking.com. Stricken airline Air France-KLM has also come under fire for its executive bonus policy. In response, CEO Ben Smith said on Thursday he was forfeiting the variable component of his pay.

Air France-KLM CEO to Forgo 2020 Bonus After Dutch Outcry

The public outcry shows how governments are walking a tightrope by handing taxpayers’ money to support jobs in the private sector and cushion the economic shock from the pandemic. It’s an especially sensitive issue in the Netherlands, a country that mixes a strong welfare state with a liberal economic tradition and some of Europe’s lowest effective corporate tax rates.

No Bonuses

Facing criticism from political rivals, Prime Minister Mark Rutte told members of parliament on Wednesday it was “obvious” that companies applying for a second round of financial help from June should stop paying shareholders and forfeit management bonuses in the near future.

Under the country’s first rescue plan, a company could ask the government to pay as much as 90% of its staff wages for three months if revenue has fallen by more than 20% due to the virus. Rutte’s allies blame the public backlash partly on a misunderstanding of the policy, whose purpose is to protect jobs and livelihoods.

“Booking’s employees shouldn’t be penalized now for shareholders’ actions in the past,” lawmaker Steven van Weyenberg, whose party is in Rutte’s governing coalition, said by phone. “We don’t want to have the same dramatic situation that we see in the U.S., with long queues outside unemployment agencies.”

Booking.com is one of the country’s biggest tech success stories. Founded in 1996, it couldn’t find enough venture capital funding in Europe and was bought in 2005 by Priceline, becoming a U.S. company by law, while retaining most of its activity in the Netherlands.

Booking Holdings had $6.3 billion in cash on its balance sheet on Dec. 31, according to its annual report. It also had $7.6 billion of debt.

“We have to save money for a reason,” Fogel said last month in response to a question about the company’s cash reserves. “Don’t think I can just hand out money. I’m not Santa Claus.”

To contact the reporter on this story:
Ruben Munsterman in Amsterdam at rmunsterman1@bloomberg.net

To contact the editors responsible for this story:
Amy Thomson at athomson6@bloomberg.net

Thomas Pfeiffer, Nate Lanxon

© 2020 Bloomberg L.P. All rights reserved. Used with permission.

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